When you think of a last will and testament, do you think of elderly people deciding how to distribute their possessions after death? That’s a common conception, and it is partly true. But the truth is that anyone with children has a very compelling reason to create a will, regardless of their financial situation or the state of their health. While it isn’t likely that you’ll pass away while your children are still minors, it is always possible.
About 50 percent of American families aren’t taking this one important step to protect their children*. What you may not realize is that without a will present upon your death, a court will make important decisions such as choosing your child’s new guardian. Someone – often the same person – will also be designated to manage your child’s finances. When you fail to specify your wishes with a legally binding will, and arrange for guardianship and financial support for your children, you can’t count on the courts making the same decisions that you would make.
Still, many parents are not taking this important step, citing such reasons as feeling it is unnecessary or not having time to get around to it**. It doesn’t necessarily need to be a complicated, time-consuming process, but you do need to think about three things. First, you need to decide upon the person you would want to raise your child in the event you are unable to do so. Second, you need to also designate someone to manage your child’s money. This could be a life insurance policy, retirement account, or any other financial assets left to your child. Third, if you don’t have any of those type of assets, you probably need to think about building some sort of financial cushion for your child. Even purchasing the minimum life insurance policy that you can afford is better than skipping this step altogether.
If you happen to have a special needs child, you have an even more compelling reason to make these contingency plans. It’s important to establish a special needs trust for your child’s financial assets, so that he or she maintains eligibility for government programs that may be needed after your passing. These types of trusts are very complicated so it’s best to speak to your financial advisor about the various rules and regulations involved.
Creating a will does not have to be overly difficult or expensive. It is, however, an important step that no parent should overlook or postpone. Your will can be altered as your needs, lifestyle, or preferences for guardianship change. Regularly review your will to be sure it provides for your child’s current needs, and continue to develop both your own financial portfolio as well as any trusts or special accounts created specifically for your children.
*Yahoo! Finance, March 28, 2012
**AARP, May 1, 2012
